Category: MIL-OSI

Source: United States Department of Justice Criminal Division

Note: View the complaint here.

A civil forfeiture complaint was filed today for $3.4 million in proceeds from the sale of a music studio in Burbank, California. The complaint alleges that the proceeds, which are beneficially owned by Russian oligarch Oleg Deripaska, are the proceeds of sanctions violations. An indictment charging Deripaska with sanctions violations had been unsealed on Sept. 29, 2022, and Deripaska remains at large.

“As the allegations in the complaint once again demonstrate, those who have illicitly accumulated great wealth in support of lawlessness and international chaos invariably turn to the safety and stability of the United States’ rule of law principles in order to preserve their ill-gotten gains. It is predictable, hypocritical, and illegal,” said Co-Director Michael Khoo of Task Force KleptoCapture. “We are nearly three years into Russia’s unprovoked further invasion of Ukraine, but today’s actions show that Task Force KleptoCapture remains vigilant and fully engaged in its mission to protect the American financial system against the abuses of criminal actors.”

“Today’s filing of a civil forfeiture complaint against over $3 million in illicit proceeds of Oleg Deripaska exemplifies this office’s commitment to utilizing all available legal remedies to enforce our critical sanctions program,” said U.S. Attorney Damian Williams for the Southern District of New York. “We remain committed to piercing the opaque financial networks utilized by sanctioned oligarchs attempting to illegally transact business in U.S. dollars.”

“As alleged, Oleg Deripaska, an OFAC Specially Designated National, through a series of companies and associates attempted to earn over $3 million in proceeds from the sale of a California-based music studio,” said Acting Special Agent in Charge James E. Dennehy of the FBI. “Today’s forfeiture filing shows the FBI’s commitment to stopping individuals from obfuscating their activities to violate sanctions. The FBI will continue to enforce the national security laws of the United States and will ensure any violation of these laws and sanctions is punished accordingly.”

According to the court documents, on April 6, 2018 (the Designation Date), the U.S. Department of the Treasury’s Office of Foreign Assets Control (OFAC) designated Oleg Deripaska as a Specially Designated National (SDN) in connection with its finding that the actions of the Government of the Russian Federation in Ukraine constitute an unusual and extraordinary threat to the national security and foreign policy of the United States. Deripaska was sanctioned for his support of the Russian government and for his activity in the Russian energy sector. On or about the same date, OFAC also designated Basic Element Limited, EN+ Group and other entities for being owned or controlled by, directly or indirectly, Deripaska.

On Sept. 29, 2022, an indictment returned by a grand jury sitting in the Southern District of New York was unsealed, charging Deripaska and his associates Olga Shriki and Natalia Mikhaylovna Bardakova with a conspiracy to violate sanctions.

As alleged in the indictment, for over four years after Deripaska was sanctioned in 2018, and in violation of those sanctions, Deripaska paid Shriki to provide various services for his benefit in the United States. These services included the sale of a music studio in Burbank, California, in 2019, as well as hundreds of thousands of dollars’ worth of other services to aid in Deripaska’s efforts to have two of his children be born in the United States in 2020 and 2022, and to purchase goods for Deripaska from the United States.

Prior to his designation by OFAC, in or about 2008, Deripaska, through a series of shell companies, acquired the music studio for over $3 million. The direct owner of the studio was an entity named Ocean Studios California LLC, which held a bank account at Wells Fargo (the Ocean Studios Account).

Between in or about 2013 and in or about 2018, Shriki lived in the United States and worked for Deripaska’s entity Basic Element in its Manhattan office. Before and after the designation date, Shriki and Deripaska’s cousin Pavel Ezubov, among others, helped to operate and fund the music studio on behalf of Deripaska, and made clear that Deripaska was the ultimate decisionmaker with regard to the music studio.

In or about July 2018, approximately three months after OFAC designated Deripaska as an SDN, Shriki created a consulting business named Global Consulting Services LLC (GCS). Through GCS, Shriki coordinated with associates of Deripaska, including Ezubov and Bardakova, to continue providing services to and for the benefit of Deripaska and to continue receiving funds from Deripaska or entities controlled by Deripaska. GCS opened a bank account at a bank in Manhattan. Between August 2018 and September 2019, the GCS account received wires totaling over $500,000 from two entities associated with Deripaska, one of which entered into a separate agreement with an indicted co-conspirator to manage other Deripaska properties abroad after the designation date.

Beginning in July 2019, the Ocean Studios account received approximately $69,000 of transfers from Shriki’s GCS account, which in turn was funded by overseas accounts tied to Deripaska, as noted above.

In or about June 2019, Shriki effectuated a sale of the contents of the music studio for more than $500,000. In December 2019, more than a year after the designation date, while employed by Deripaska, Shriki assisted with the sale of the music studio by Ocean Studios California LLC in various ways, such as preparing the property for sale, coordinating with the accounting firm for the music studio, communicating with the real estate broker to approve the sale, facilitating the payment of outstanding taxes and bills for the music studio, signing over the property deed, and liquidating the other assets in the music studio. The music studio sale resulted in net proceeds of over $3 million, which were deposited in the Ocean Studios account.

During 2020, while Shriki was employed by Deripaska and continued to perform services for Deripaska, Shriki requested that an accounting firm transfer the proceeds from the sale of the music studio to a bank account in Russia in the name of a company that funded the music studio’s accounts after the designation date — or, in the alternative, requested that the accounting firm add Shriki as a signatory on the bank account for the music studio so that Shriki could effectuate the transfer of funds on behalf of the owner. The firm declined to effectuate the wire transfer itself.

In or about March 2021, Wells Fargo made the determination to block the Ocean Studios account and the funds on deposit due to Ocean Studios account’s relationship with Deripaska. The blocked funds subject to the complaint amount to approximately $3,435,676 plus accruing interest.

The FBI is investigating the case. The Department of Justice’s Office of International Affairs assisted in the investigation.

Assistant U.S. Attorney Vladislav Vainberg for the Southern District of New York is litigating the case.

On March 2, 2022, the Attorney General announced the launch of Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export restrictions, and economic countermeasures that, beginning in 2014, the U.S. has imposed, along with allies and partners, in response to Russia’s unprovoked military invasion of Ukraine. The Task Force will leverage all the Department’s tools and authorities against efforts to evade or undermine the economic actions taken by the U.S. government in response to Russian military aggression.

Source: United States Department of Justice Criminal Division

Sergey Nechaev, a dual U.S.-Russian citizen, was arrested today in the Southern District of Georgia on charges related to the unlawful attempted export of two small aircraft to Russia. In conjunction with the arrest, the U.S. government also seized the aircraft.

According to the indictment, between March 3, 2023, and March 24, 2023, Nechaev engaged in a scheme to violate and evade U.S. export control laws and regulations by attempting to smuggle two Cessna aircraft from the United States to Russia by transshipping them through Armenia. Specifically, after the U.S. government imposed stricter controls on Russia in February 2022, Nechaev attempted to export a 1968 Cessna 172K and a 1973 Cessna, valued together at approximately $170,000, to a purported Russian flight school, without the required license or authorization from the Department of Commerce. To conceal the true end user and destination of the aircraft, Nechaev falsely represented that the end user and destination were in Armenia.

Nechaev is charged with attempting to export controlled goods without a license in violation of the Export Control Reform Act (ECRA), smuggling goods contrary to U.S. law, and causing the submission of false and misleading information in Electronic Export Information paperwork submitted through the Automated Export System. If convicted, Nechaev faces a maximum penalty of 20 years in prison for the unlawful attempted export of controlled goods; up to 10 years in prison for smuggling; and up to five years in prison for falsifying export information. The aircraft will also be subject to forfeiture as property involved in the commission of the crime. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

The U.S. Department of Commerce’s Office of Export Enforcement, the U.S. Department of Homeland Security’s Homeland Security Investigations, the U.S. Customs and Border Protection, and the Federal Aviation Administration are investigating the case.

Assistant U.S. Attorneys Darron Hubbard and L. Alexander Hamner for the Southern District of Georgia and Trial Attorneys Leslie Esbrook and Fatema Merchant of the National Security Division’s Counterintelligence and Export Control Section are prosecuting the case.

The investigation was coordinated through the Justice Department’s Task Force KleptoCapture, an interagency law enforcement task force dedicated to enforcing the sweeping sanctions, export controls and economic countermeasures that, beginning in 2014, the United States, along with its foreign allies and partners, has imposed in response to Russia’s unprovoked military invasion of Ukraine. Announced by the Attorney General on March 2, 2022, and under the leadership of the Office of the Deputy Attorney General, the task force will continue to leverage all of the department’s tools and authorities to combat efforts to evade or undermine the collective actions taken by the U.S. government in response to Russian military aggression.

An indictment is merely an allegation. All defendants are presumed innocent until proven guilty beyond a reasonable doubt in a court of law.

Source: United States Department of Justice Criminal Division

Gen Digital Inc. (formerly known as Symantec Corp.), located in Tempe, Arizona, paid $55.1 million to satisfy a judgment, concluding a decade of False Claims Act litigation. The judgment required the company to pay $16.1 million in damages and $36.8 million in civil penalties, plus post-judgment interest and costs.

“The department will hold accountable contractors that knowingly overcharge the United States to enrich themselves,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The years spent litigating this case and taking it to trial demonstrate the department’s steadfast commitment to protecting taxpayer funds.”

Following a four-week bench trial in February and March 2022, the trial court found Symantec liable for making knowing false claims to the United States when it mispresented its commercial sales practices during the negotiation and subsequent performance of a General Services Administration (GSA) contract. In particular, the court concluded that Symantec made false statements to GSA during contractual negotiations in 2006 and early-2007 and continued to falsely certify throughout the performance of the contract through Sept. 30, 2012, that its disclosures of its commercial sales practices were current, accurate and complete. The false disclosures induced GSA to accept and then continue to pay higher prices than it would have had it known of Symantec’s actual commercial pricing practices.

The court also found that Symantec continuously violated the Price Reduction Clause, a standard term in these types of Multiple Award Schedule contracts that requires the contractor throughout performance of the contract to maintain GSA’s price position in relation to an identified customer or category of customer agreed upon in contract negotiations. These violations deprived the United States of discounts to which it was entitled.

“The trial team secured a $55 million judgment that holds accountable a contractor who intentionally tried to overbill the government,” said U.S. Attorney Matthew M. Graves for the District of Columbia. “Because these schemes steal taxpayer dollars, the United States Attorney’s Office for the District of Columbia will be steadfast in its efforts to bring fraudsters to justice no matter the complexity of the matter, pursuing them through trial, if necessary, to secure a just outcome.”

“The United States deserves fair prices and accurate information from GSA contractors,” said GSA Deputy Inspector General Robert C. Erickson. “This outcome is the result of hard work and dedication by a cross-functional team from the U.S. Department of Justice, GSA and GSA Office of Inspector General.”

Gen Digital’s payment ends a lawsuit filed under the qui tam or whistleblower provision of the False Claims Act, which permits private parties to file suit on behalf of the United States for false claims and share in a portion of the government’s recovery. The Act permits the United States to intervene and take over responsibility for litigating these cases, as the United States did here. The qui tam case is captioned United States ex rel. Morsell v. Symantec Corp., Civ. A. No. 12-0800 (DDC), and was brought by Lori Morsell, who administered the contract at issue for Symantec. Her share of the recovery has not yet been determined.

This successful litigation was a coordinated effort between the Civil Division’s Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the District of Columbia, with assistance from GSA’s Office of General Counsel and Office of Inspector General.

Senior Trial Counsel Daniel Schiffer and Trial Attorney F. Elias Boujaoude of the Justice Department’s Civil Division and Civil Chief Brian P. Hudak for the District of Columbia handled the matter.

Source: United States Department of Justice Criminal Division

Assistant Attorney General Kristen Clarke of the Civil Rights Division and U.S. Attorney Kate E. Brubacher for the District of Kansas issued the following statement today regarding the death of Roger Golubski, who was set to face trial this week:

“This matter involved extremely serious charges, and it is always difficult when a case is unable to be fully and fairly heard in a public trial and weighed and determined by a jury. The proceedings in this case may be over, but its lasting impact on all the individuals and families involved remains. We wish them peace and the opportunity for healing as they come to terms with this development and ask that they all be treated with respect and their privacy respected.”

Source: United States Department of Justice Criminal Division

The United States Trustee Program (USTP) recently obtained denial of bankruptcy discharge for a chapter 7 debtor who had not filed tax returns for many years and did not maintain records for his business.

On October 31, the Bankruptcy Court for the Eastern District of Kentucky granted the U.S. Trustee’s motion for summary judgment and denied a discharge to chapter 7 debtor Charbel Joseph, the sole proprietor of an unincorporated construction business. The debtor claimed assets of just over $21,000 and debts of more than $10 million. An investigation by the U.S. Trustee’s Lexington office revealed that the debtor had not filed tax returns in 16 years, did not maintain any bank accounts and operated a construction business on a cash basis. The debtor produced copies of dozens of checks totaling more than $1.4 million payable to him and dated within two years of the bankruptcy filing, but he was unable to account for the disposition of about $1.3 million of those funds.

The U.S. Trustee filed a complaint seeking to bar the debtor’s discharge and, after discovery closed, filed a motion for summary judgment. After oral argument, the court granted the motion over the debtor’s objection and entered judgment in the U.S. Trustee’s favor.

One of the USTP’s core functions is to combat bankruptcy fraud and abuse through civil enforcement actions against debtors who engage in fraud or otherwise abuse the bankruptcy system. When circumstances warrant, the USTP takes action to deny those debtors a discharge. Under section 727(a)(3) of the Bankruptcy Code, debtors are not entitled to a discharge if they unjustifiably conceal, destroy, mutilate, falsify or fail to maintain or preserve records about their financial condition or business transactions.

“The bankruptcy discharge is the key to a fresh start and comes with obligations, including transparency about the debtor’s financial condition” said Director Tara Twomey of the Executive Office for U.S. Trustees. “Although the vast majority of debtors are honest people who simply want to overcome their financial challenges, cases such as this one require action to prevent unfair manipulation of the bankruptcy system.”

The USTP’s mission is to promote the integrity and efficiency of the bankruptcy system for the benefit of all stakeholders – debtors, creditors and the public. The USTP consists of 21 regions with 89 field offices nationwide and an Executive Office in Washington, D.C. Learn more about the USTP at www.justice.gov/ust.